WASHINGTON, March 2 (Reuters) - Gary Gensler, chief
regulator of U.S. derivatives markets, is working to break up
the Wall Street club where he cut his professional teeth, but
concedes it will take some time.

As part of the Commodity Futures Trading Commission's job
to implement 2010's Dodd-Frank financial reforms, Gensler said
that the agency he leads is trying to bring more competition to
the highly profitable derivatives market.

"I think Congress' intent was to open it up. We'll see how
successful. You'll get to judge that in a few years," Gensler
said on Wednesday at the Reuters Future Face of Finance
Summit.

Gensler spent 18 years at Goldman Sachs, making partner at
age 30, before joining the Treasury Department and becoming
CFTC chairman in 2009. Critics have raised questions over the
years about the revolving door between Goldman Sachs and the
corridors of regulatory power in Washington.

"I had a number of experiences that I draw upon. That's
part of who I am. I'm proud of that background. I've learned
from it, but I've also learned a lot in the 13 years since"
leaving Wall Street, Gensler said.

As the CFTC works to implement scores of new rules mandated
by Congress in the Dodd-Frank law, Gensler has had to face down
aggressive lobbying by Wall Street firms intent on preserving
the substantial profits they realize from derivatives.

TAKING RISK OFF TAXPAYERS' BACKS

He said it is "a perverse outcome" of the government's
bailouts of Wall Street during the 2007-2009 crisis that many
Americans today feel that Wall Street's dominance of the
financial system is still strong despite reforms.

To address that perception and reduce the risks posed to
the system by a market that previously was unpoliced, he said,
"In terms of derivatives, the best we can do is to ensure that
as many swaps as possible come into clearinghouses."

One of the central goals of Dodd-Frank is to redirect much
of the OTC derivatives market through exchanges, electronic
trading platforms and central clearinghouses that stand behind
dealings in derivative contracts.

"What that means to the American public is it's less likely
that the taxpayers stand behind that transaction," he said.

"Instead the clearinghouse stands behind it, and I think
that's what Congress recognized. Moving as much of this into
clearinghouses lowers interconnectedness, but also says a
clearinghouse stands there, not the taxpayer."

"I also think transparency helps," he said, looking back to
the widespread uncertainty during the crisis of the value of
toxic assets on the books of giants such as American
International Group (AIG.N).

"The law now says that they have to be valued daily and
valuations have to be shared between the counter-parties and if
they run a clearinghouse, the clearinghouse has to share it
with the public. So in the lane we swim in, it's transparency,
it's clearinghouses, it's the regulation of the dealers."

DISCUSSING FOREX WITH TREASURY

Dodd-Frank gives the Treasury secretary the power to
determine whether foreign exchange swaps and forwards are
covered or exempt from the rules.

Gensler had urged lawmakers to keep the exemption as narrow
as possible. He said he has been talking with Treasury
officials as they craft their decision, but declined to make
his opinion public. "They know my advice," he said.

Congress gave the CFTC a July deadline to finalize its
"mosaic" of more than 40 regulations, but won't begin that
process this month, Gensler said. The agency still needs to
unveil two key rules defining swaps and outlining capital and
margin requirements for swaps dealers and major players.

Meanwhile, Gensler has been negotiating with lawmakers for
more money for the agency.

The CFTC's budget has been held static at $169 million this
year, about 50 percent less than what the agency had hoped for.
The Obama administration proposed an 80 percent hike to $308
million for 2012.

The agency faces an uphill battle getting more money from
Congress with House Republicans questioning the need for more
market regulation.

"It's important to fund the agency so there is an effective
cop on the beat," Gensler said.

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